David A. Stockman. The Great Deformation: The Corruption of Capitalism in America. PublicAffairs, 2013. See here to purchase the book.
David Stockman has served as a congressman, President Ronald Reagan’s budget director, and a private equity investor.
While people with a solid grounding in economics are the ones who will understand this book, Stockman is pretty clear about what he supports and what he opposes. He favors a sound and tight currency (i.e., gold standard) rather than the Federal Reserve printing out lots of money. He is critical of debt, both government debt but also people borrowing lots of money (due to low interest rates) that they will not pay back. He is against deficits, so he favors cuts in government spending and is critical of tax cuts; he favors a VAT. His belief in fiscal responsibility encompasses both domestic programs and also the military. He wants federal welfare programs to be stricter and more means-tested, and he opposes regime-changing wars. He is highly critical of crony capitalism and favors rigorous campaign finance reform. He supports a stronger Glass-Steagall. While he supports free markets, he is not anti-regulation; he does, however, want to abolish the minimum wage.
On the issue of trade, his position is unclear. He does not seem to like jobs going overseas, and he laments that the U.S. has increases in health care and education jobs but not in jobs in the productive sphere. Yet, he argues that high tariffs contributed to the Great Depression and appears critical of the U.S. ceasing its reliance on cheap imported oil to focus on domestic energy.
The book is particularly interesting and informative in its revisionist history, on a number of fronts. Some examples:
—-The U.S. economy was gradually improving until Franklin Roosevelt became President, so the New Deal did not get the U.S. out of the Depression.
—-The severe economic downturn in 1936-1937 was not due to the government cutting its spending and raising taxes. Rather, it was due to people not spending money after their stimulus cash ran out.
—-World War II does not demonstrate the success of Keynesianism, uplifting the economy through intense deficit spending. The U.S. actually fought World War II in a fiscally responsible, pay-as-you-go manner.
—-The energy crisis of the 1970’s was not due to anything OPEC did, for what OPEC did was brief. Rather, it was part of the general inflation of the period, due to increasing government spending (Great Society, Vietnam), tax cuts, and the undermining of the gold standard.
—-Ronald Reagan’s tax cuts did not improve the economy. The Reagan prosperity was fueled by debt and assisted by Paul Volker’s drastic squeezing out of inflation. Statistics indicate that supply and production did not boom during the Reagan years but only increased slightly. The increase in government revenue that eventually occurred under Reagan was due to his tax increases.
—-Reagan’s defense buildup was unnecessary and largely relied on conventional warfare, when, for Stockman, nuclear weapons were a cheaper way to deter the Soviets.
—-The Wall Street bailout in the late 2000’s was unnecessary to save Main Street, for Main Street largely did not use those Wall Street banks.
While Stockman does not cite many sources in the course of the book, he gives his sources in the appendix. His economics numbers are largely based on Federal Reserve statistics. He also prefers many sources prior to the 1950’s, since they are not as Keynesian and do not blame tight money for the bank panics in the nineteenth-early twentieth centuries.
The book has its heroes, villains, and those in between. Franklin Roosevelt, Richard Nixon, and Milton Friedman get criticism for undermining the gold standard. Ronald Reagan is criticized for federal deficits and debt. Dwight Eisenhower, however, receives praise for supporting balanced budgets, and Gerald Ford, at least in the early stage of his Presidency, for being a deficit hawk.
This book is advanced and often went over my head, but the prose is still breezy. Stockman also intersperses his narrative with pop culture analogies, such as Lucy taking away the football from Charlie Brown.
I checked this book out from the library. My review is honest.